In Depth: Trump Tariffs Could Clip the Wings of China’s Air Cargo Firms

U.S. President Donald Trump’s imposition of new trade barriers, especially the elimination of the de minimis duty-free policy for small parcels valued at $800 or less from China and Hong Kong, has significantly disrupted China’s air cargo sector. This policy, vital for cross-border e-commerce—which accounts for 60% to 70% of all Chinese air cargo volume—means small parcels are now subject to tariffs as high as 120% of their value or flat fees reaching $200 by June 1, 2024. The unpredictability and rapid escalation of these tariffs have left Chinese logistics and e-commerce companies scrambling to adapt, leading to market turmoil and an immediate impact on shipping demand and pricing. [para. 1][para. 2][para. 3][para. 4]

In anticipation of these tariff hikes, many Chinese companies rushed shipments ahead of key deadlines, temporarily boosting air freight rates. For example, between April 1 and 7, 2024, the TAC Index shows Hong Kong outbound cargo rates increased by 2.9%, and Shanghai by 2.5%. However, after April 9, demand dropped sharply—general air freight rates fell by as much as 3.7% and inquiries for U.S. shipping routes from China “dried up.” As tariffs surpassed 100%, shipping goods by air to the U.S. became economically unfeasible. This mirrors the chaos in early February, when a sudden elimination of the de minimis exemption saw air cargo demand collapse, triggering a temporary policy rollback due to U.S. customs’ inability to handle the surge in shipments. [para. 7][para. 8][para. 9][para. 10][para. 11][para. 12][para. 13][para. 14][para. 15][para. 16][para. 17]

Technical and administrative problems have further hindered the logistics industry. For instance, on April 11, a computer issue at U.S. customs made it impossible to process the new exemption code for shipments already en route, causing additional delays. These systemic challenges underscore the strain new regulations place on both trading partners and U.S. authorities, who lack the capacity to immediately enforce and process the new rules effectively. [para. 18]

Chinese state-owned airlines, particularly Air China, China Eastern, and China Southern, have been especially impacted. Previously buoyed by pandemic disruptions and a surge in e-commerce, these carriers now face significant challenges. In 2024, China’s cross-border e-commerce trade reached 2.63 trillion yuan ($361 billion)—a 10.8% year-on-year increase—and large logistics companies saw profits soar: Air China Cargo’s profits rose 69%, Eastern Air Logistics 8%, and China Southern Air Logistics 72%. However, the looming U.S. tariffs threaten this growth, with companies warning in reports and via regulatory filings that the end of de minimis and higher tariffs may severely suppress demand and sales, especially given that nearly half of their international routes are tied to the United States. [para. 22][para. 23][para. 24][para. 25][para. 26][para. 27][para. 28][para. 29]

Logistics firms are now pivoting away from U.S.-dependence. Companies like Eastern Air Logistics are expanding in Europe, the Middle East, South America, and Southeast Asia. Others, capitalizing on China’s Belt and Road Initiative, aim to compensate for declining U.S. business by cultivating other large markets. Some are routing goods via third countries to circumvent direct U.S. tariffs. Additionally, logistics companies are diversifying beyond cross-border e-commerce—Eastern Air Logistics, for example, saw a 73.3% increase in revenue from perishable food transportation (cold-chain logistics), though this remains only half the value of its e-commerce business. Despite headwinds, executives remain optimistic about the long-term prospects of China’s air freight sector, citing growth in high-end manufacturing and global e-commerce trends. [para. 30][para. 31][para. 32][para. 33][para. 34][para. 35][para. 36][para. 37][para. 38][para. 39][para. 40]